Abel Company's business year ends on December 31.

3. Abel Company's business year ends on December 3]. Listed below are purchase transactions which occurred during the last few days of 2014 or during the rst few days of 2015. The inventory, determined by physical count, was taken after the close of business on December 31, 2014. The only adjusting entry recorded to date has been to enter the December 31 physical inventory on the books and to remove the beginning inventory. Instructions (a) On the accompanying chart, indicate the effect of each of these transactions on the ending inventory and on reported net income for 2014, by writing the words overstated, understated, or no effect in the appropriate column. Both columns must be answered for each transaction. (b) Prepare all necessary correcting entries for 2014. (0) Indicate which of the correcting entries must be reversed in 2013 by preparing the necessary reversing entries. 1281.114 Physical 2014 Inventory Income 1. An invoice for $7,000, terms f.o.b. shipping point, was received and entered December 30. The invoice shows that the merchandise was shipped December 29, and the receiving report indicates the merchandise was received January 2. 2. An invoice for $3 00, terms f.o.b. shipping point, was received and entered December 30. The invoice shows that merchandise was shipped December 29, and the receiving report shows the merchandise was received December 31. 3. An invoice for $4,000, terms f.o.b. shipping point, was received and entered January 2. The invoice shows the merchandise was shipped December 30, and the receiving report indicates the merchandise was received December 31. 4. An invoice for $800, terms f.o.b. destination, was received and entered December 30. The receiving report shows the merchandise was received January 2. 5. An invoice for $500, terms f.o.b. destination, was received and entered December 29. The receiving report indicates that the merchandise was received December 31. 6. An invoice for $1,500, terms f.o.b. destination, was received and entered January 2. The receiving report indicates the merchandise was received December 31. 7. Merchandise costing $15,000 and with a selling price of $18,000 was on consignment to Maris Distributing Company and was on that company's premises on December 31. No entry has been made for the consignment. 4. Accrued items and deferred (unearned or prepaid) items. Generally accepted accounting principles require the use of accruals and deferrals in the determination of income. How is income determined under the accrual-basis of accounting? Include in your answer what constitutes an accrued item and a deferred (prepaid) item, and give appropriate examples of each